Investors should sell raw sugar for May delivery and buy the July contract, Societe Generale SA said in a report.
The May contract is trading at a 1.7 percent premium to July, a market structure known as backwardation that indicates investor concern about supplies in the earlier month. The premium may switch to a discount as supply improves, Michael Haigh, the bank’s global head of commodities research based in New York, wrote in the report yesterday.
“With the global balance expected to be in surplus in the 2011-12 marketing year, we see a downward bias to prices in the coming year, as fears of a shortage are abated, continuing to move spreads towards contango,” he wrote.
The bank forecast a 2012 raw sugar price of 23.1 cents a pound. Raw sugar for March delivery was trading at 24.13 cents as of 5:23 a.m. on ICE Futures U.S. in New York.